Interpretation.

402

In this chapter,––

402(1)

“Administrator” shall have the same meaning as assigned to it in section 2(a) of the Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002;

402(2)

“agricultural land” means agricultural land in India,––

• (a) not being a land situate in any area referred to in section 2(22)(iii), for the purposes of section 393(1) [Table: Sl. No. 3(i)];
• (b) including a land situated in any area referred to in section 2(22)(iii), for the purposes of section 393(1) [Table: Sl. No. 3(iii)];

402(3)

“an incorrect claim apparent from any information in the statement” shall mean a claim, on the basis of an entry, in the statement—

• (a) of an item, which is inconsistent with another entry of the same or some other item in such statement;
• (b) in respect of rate of deduction of tax at source, where such rate is not as per the provisions of the Act;

402(4)

“authorised dealer” means a person authorised by the Reserve Bank of India under section 10(1) of the Foreign Exchange Management Act, 1999 to deal in foreign exchange or foreign security;

402(5)

“banking company” means a banking company to which the Banking Regulation Act, 1949 applies;

402(6)

“buyer” for the purposes of provisions in column B of the Table below means any person as specified in column C but does not include any person as specified in column D:—

402(7)

“commission or brokerage” includes any payment received or receivable, directly or indirectly, by a person acting on behalf of another person,––

• (a) for services rendered (not being professional services); or
• (b) for any services in the course of buying or selling of goods; or
• (c) in relation to any transaction relating to any asset, valuable article or thing, not being securities;

402(8)

“computer resource”, “internet” and “online game” shall have the meanings respectively assigned to them in section 194(2);

402(9)

“consideration for transfer of any immovable property” shall include all charges of the nature of,—

• (a) club membership fee; or
• (b) car parking fee; or
• (c) electricity or water facility fee; or
• (d) maintenance fee; or
• (e) advance fee;
• (f) or any other charges of similar nature, which are incidental to transfer of the immovable property;

402(10)

“contract” shall include sub-contract;

402(11)

“designated person”, for the purposes of section 393(1) (Table: Sl. No. 6), means—

• (a) the Central Government or any State Government; or
• (b) any local authority; or
• (c) any corporation established by or under a Central Act or State Act or Provincial Act; or
• (d) any company; or
• (e) any co-operative society; or
• (f) any authority, constituted in India by or under any law, engaged either for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages, or for both; or
• (g) any society registered under the Societies Registration Act, 1860 or under any law corresponding to that Act in force in any part of India; or
• (h) any trust; or
• (i) any University established or incorporated by or under a Central Act or State Act or Provincial Act and an institution declared to be a university under section 3 of the University Grants Commission Act, 1956; or
• (j) any Government of a foreign State or a foreign enterprise or any association or body established outside India; or
• (k) any firm; or
• (l) any person, being an individual or a Hindu undivided family or an association of persons or a body of individuals, if such person,— (i) does not fall under any of the preceding sub-clauses; and (ii) has total sales, gross receipts or turnover from business or profession carried on by him exceeding one crore rupees in case of business or fifty lakh rupees rupees in case of profession during the tax year immediately preceding the tax year in which such sum is credited or paid to the account of the contractor;

402(12)

“electronic commerce” means the supply of goods or services, or both, including digital products, over digital or electronic network;

402(13)

“e-commerce operator” means a person who owns, operates or manages digital or electronic facility or platform for electronic commerce;

402(14)

“e-commerce participant” means a person resident in India selling goods or providing services, or both, including digital products, through digital or electronic facility or platform for electronic commerce;

402(15)

“fees for technical services” shall have the meaning as assigned to it in section 9(7)(b);

402(16)

“foreign exchange asset” means any specified asset which the assessee has acquired or purchased with, or subscribed to in, convertible foreign exchange;

402(17)

“Foreign Institutional Investor” shall have the meaning as assigned to it in section 210(6)(a);

402(18)

“goods carriage” shall have the meaning as assigned to it in section 58(10)(d);

402(19)

“immovable property” means any land (other than agricultural land) or any building or part of a building;

402(20)

“investor” shall have the meaning assigned to it in section 221(6)(a), for the purposes of section 393(1) [Table: Sl. No. 4(iv)] and section 393(2) (Table: Sl. No. 9);

402(21)

“licensee or lessee” means any person, other than a public sector company, who has been granted a lease or a license or entered into a contract or otherwise received any right or interest either in whole or in part in any parking lot or toll plaza or mine or quarry, from the licensor or lessor for the use of parking lot or toll plaza or mine or quarry for the purposes of business;

402(22)

“licensor or lessor” means any person who grants a lease or a license or enters into a contract or otherwise transfers any right or interest either in whole or in part in any parking lot or toll plaza or mine or quarry, to another person, other than a public sector company for the use of such parking lot or toll plaza or mine or quarry for the purposes of business;

402(23)

“non-resident Indian” shall have the meaning assigned to it in section 212(d);

402(24)

“Offshore Banking Unit” shall have the same meaning as assigned to it in section 2(u) of the Special Economic Zones Act, 2005;

402(25)

“online gaming intermediary” means an intermediary who offers one or more online games;

402(26)

“overseas tour programme package” means any tour package which offers visit to any country or territory outside India and includes expenses for travel or hotel stay or boarding or lodging or any other expenditure of similar nature or in relation thereto;

402(27)

“person responsible for paying” means—

• (a) in the case of payments of income chargeable under the head “Salaries”, other than payments by the Central Government or the State Government–– (i) the employer himself; or (ii) if the employer is a company, the company itself, including the principal officer thereof;
• (b) in the case of payments of income chargeable under the head “Interest on securities”, other than payments made by or on behalf of the Central Government or State Government, or local authority, or corporation or company, including the principal officer thereof;
• (c) in the case of any sum payable to a non-resident Indian, being any sum representing consideration for the transfer by him of any foreign exchange asset, which is not a short-term capital asset, the authorised person responsible–– (i) for remitting such sum to the non-resident Indian; or (ii) for crediting such sum to his Non-resident (External) Account maintained as per the provisions of the Foreign Exchange Management Act, 1999, and any rules made thereunder;
• (d) in the case of furnishing of information relating to payment to a non-resident, not being a company, or to a foreign company, of any sum, whether or not chargeable under the provisions of this Act–– (i) the payer himself; or (ii) if the payer is a company, the company itself including the principal officer thereof;
• (e) in the case of credit, or, as the case may be, payment of any other sum chargeable under the provisions of this Act–– (i) the payer himself; or (ii) if the payer is a company, the company itself including the principal officer thereof;
• (f) in the case of credit, or as the case may be, payment of any sum chargeable under the provisions of this Act made by or on behalf of the Central Government or the State Government–– (i) the drawing and disbursing officer; or (ii) any other person, by whatever name called, responsible for crediting, or paying such sum;
• (g) in the case of a person not resident in India–– (i) the person himself; or (ii) any person authorised by such person; or (iii) the agent of such person in India including any person treated as an agent under section 306, where the expression “authorised person” shall have the same meaning as assigned to it in section 2(c) of the Foreign Exchange Management Act, 1999;

402(28)

“professional services” means services rendered by a person in the course of carrying on legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or advertising or such other profession as notified by the Board for the purposes of this section, or of section 62;

402(29)

“rent” means any payment, by whatever name called, under any lease, sub-lease, tenancy or any other agreement or arrangement for the use of (either separately or together) any—

• (a) land; or
• (b) building (including factory building); or
• (c) land appurtenant to a building (including factory building); or
• (d) machinery; or
• (e) plant; or
• (f) equipment; or
• (g) furniture; or
• (h) fittings, whether or not any or all of the above are owned by the payee, and for the purposes of section 393(1) [Table: Sl. No. 2(i)], only the payment with reference to assets mentioned in sub-clauses (a), (b) and (c) shall be treated as rent;

402(30)

“royalty” shall have the meaning assigned to it in section 9(6)(b);

402(31)

“scrap” means waste and scrap from the manufacture or mechanical working of materials which is definitely not usable as such because of breakage, cutting up, wear and other reasons;

402(32)

“securities” shall have the same meaning as assigned to it in section 2(h) of the Securities Contracts (Regulation) Act, 1956;

402(33)

“seller” means––

• (a) for the purposes of section 394(1) (Table: Sl. No. 1 to 6),— (i) the Central Government; or (ii) a State Government; or (iii) any local authority or corporation or authority established by or under a Central Act or State Act or Provincial Act; or (iv) any company or firm or co-operative society; or (v) an individual or a Hindu undivided family, whose total sales, gross receipts or turnover from the business or profession carried on by him exceed one crore rupees in case of business or fifty lakh rupees in case of profession during the tax year immediately preceding the tax year in which the goods of the nature specified in such serial numbers are sold;
• (b) for the purposes of section 394(1) (Table: Sl. No. 8), a person who sells overseas tour program package;

402(34)

“services” for the purposes of section 393(1) [Table: Sl. No. 8(v)], includes “fees for technical services” and fees for “professional services”, as defined in this section;

402(35)

“specified bank” means a banking company as the Central Government may, by notification, specify;

402(36)

“specified company” means for the purposes of section 393(1) [Table: Sl. No. 4(i)] and 393(2) (Table: Sl. No. 10), a company as referred to in section 2(h) of the Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002;

402(37)

“specified person” means––

• (a) any person, not being an individual or Hindu undivided family; or
• (b) an individual or a Hindu undivided family, whose total sales, gross receipts or turnover from the business or profession carried on by him exceed one crore rupees in case of business or fifty lakh rupees in case of profession during the tax year immediately preceding the tax year in which such income is credited or paid;

402(38)

“special purpose vehicle” shall have the meaning in Schedule V (Note 2);

402(39)

“specified senior citizen” means an individual, being a resident in India—

• (a) who is of the age of seventy-five years or more at any time during the tax year;
• (b) who is having pension income and no other income except the interest received or receivable from any account maintained by such individual in the same specified bank in which he is receiving his pension income; and
• (c) has furnished a declaration to the specified bank containing particulars, in such form and verified in such manner as prescribed;

402(40)

“specified undertaking” shall have the same meaning as assigned to it in section 2(i) of the Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002;

402(41)

“time deposits” means deposits (including recurring deposits) repayable on the expiry of fixed periods;

402(42)

“unit” for the purposes of section 393(1) [Table: Sl. No. 4(iii)] and section 393(2) (Table: Sl. No. 8) shall have the meaning assigned to it in section 224(10)(c);

402(43)

“Unit Trust of India” means the Unit Trust of India as referred to in the Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002;

402(44)

"University", referred in section 392(4), means a University established or incorporated by or under a Central, State or Provincial Act, and includes an institution declared under section 3 of the University Grants Commission Act, 1956, to be a University for the purposes of that Act;

402(45)

“user” means any person who accesses or avails any computer resource of an online gaming intermediary;

402(46)

“user account” means account of a user registered with an online gaming intermediary;

402(47)

“work” shall include—

• (a) advertising;
• (b) broadcasting and telecasting including production of programmes for such broadcasting or telecasting;
• (c) carriage of goods or passengers by any mode of transport other than by railways;
• (d) catering;
• (e) manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from–– (i) such customer; or (ii) its associate, being a person placed similarly in relation to such customer as is the person placed in relation to the assessee under the provisions contained in section 36(3), but does not include— (A) manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from a person, other than such customer or associate of such customer; or (B) any sum referred to in section 393(1) [Table: Sl. No. 6(iii)].

Explanation

Section Summary:

Section 402 provides definitions for key terms used in the chapter of the Income Tax Act. These definitions are crucial for interpreting and applying the provisions of the law correctly. The section clarifies terms related to various entities, transactions, and concepts such as agricultural land, e-commerce, immovable property, professional services, and more. It ensures consistency in understanding and applying the law across different scenarios.

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Key Changes:

1. New Definitions Introduced: Terms like "e-commerce operator," "e-commerce participant," "online gaming intermediary," and "user account" have been explicitly defined, reflecting the evolving digital economy.
2. Expanded Scope of "Agricultural Land": The definition now includes specific exclusions and inclusions based on the location of the land, as per section 2(22)(iii).
3. Clarification on "Incorrect Claim": A new definition for "incorrect claim apparent from any information in the statement" has been added, focusing on inconsistencies in tax statements and incorrect TDS rates.
4. Inclusion of Digital and Online Terms: Definitions for "computer resource," "internet," and "online game" have been introduced, aligning the law with modern technological advancements.
5. Broadening of "Rent": The definition of rent now explicitly includes payments for the use of land, buildings, machinery, plant, equipment, furniture, and fittings.

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Practical Implications:

1. Taxpayers and Businesses:

   • E-commerce Entities: E-commerce operators and participants must ensure compliance with tax provisions specific to digital transactions.
   • Real Estate Transactions: The inclusion of incidental charges (e.g., club membership fees, maintenance fees) in the consideration for immovable property transfers may impact capital gains calculations.
   • TDS Compliance: The definition of "incorrect claim" emphasizes the need for accurate reporting of TDS rates and consistency in tax statements.
   • Agricultural Land: Taxpayers must carefully determine whether their land qualifies as agricultural land based on the new location-based criteria.

2. Government and Regulatory Bodies:

   • The definitions provide clarity for enforcing tax laws, especially in areas like digital transactions, online gaming, and e-commerce.

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Critical Concepts:

1. Agricultural Land:
   • Excludes land in areas specified under section 2(22)(iii) for certain purposes but includes it for others, depending on the context.
2. E-commerce:
   • Refers to the supply of goods or services over digital networks, including digital products.
3. Incorrect Claim:
   • Refers to inconsistencies in tax statements or incorrect TDS rates applied, which can lead to penalties.
4. Rent:
   • Includes payments for the use of land, buildings, machinery, and other assets, even if the payee does not own them.
5. Professional Services:
   • Covers services rendered by professionals like lawyers, doctors, engineers, and accountants, as well as other notified professions.

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Compliance Steps:

1. For E-commerce Operators and Participants:
   • Ensure proper classification of transactions as per the definitions provided.
   • Maintain accurate records of digital transactions for tax reporting.
2. For Real Estate Transactions:
   • Include all incidental charges (e.g., club fees, maintenance fees) in the consideration for property transfers.
   • Report these amounts correctly in capital gains calculations.
3. For TDS Compliance:
   • Verify that TDS rates applied are consistent with the provisions of the Act.
   • Ensure consistency across all entries in tax statements to avoid incorrect claims.
4. For Agricultural Land:
   • Determine the classification of land based on the new location-based criteria.
   • Maintain documentation to support the classification.

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Examples:

1. E-commerce Transaction:

   • An online marketplace (e-commerce operator) facilitates the sale of goods by a seller (e-commerce participant) through its platform. The marketplace must ensure that all transactions are reported correctly under the new definitions.

2. Real Estate Transaction:

   • A buyer purchases a property and pays additional charges like club membership fees and maintenance fees. These charges must be included in the total consideration for the property transfer and reported in capital gains calculations.

3. Incorrect TDS Claim:

   • A company deducts TDS at 10% on interest payments, but the correct rate as per the Act is 20%. This inconsistency would qualify as an "incorrect claim apparent from any information in the statement."

4. Agricultural Land:

   • A taxpayer owns land in an area specified under section 2(22)(iii). Depending on the purpose (e.g., capital gains calculation), the land may or may not qualify as agricultural land under the new definitions.

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This section ensures clarity and consistency in interpreting key terms, which is essential for accurate tax compliance and reporting.